NASDAQ 20 th Investor Program. Dr. Eli Harari Chairman and Chief Executive Officer. December 4, 2007

Transcription

1 NASDAQ 20 th Investor Program Dr. Eli Harari Chairman and Chief Executive Officer December 4, 2007

2 Forward-Looking Statement During our meeting today we will be making forward-looking statements. Any statement that refers to expectations, projections or other characterizations of future events or circumstances is a forward-looking statement, including those relating to revenue, pricing, market share, market growth, product sales, industry trends, expenses, gross margin, production capacity and technology transitions and future products. Actual results may differ materially from those expressed in these forward-looking statements including due to the factors detailed under the caption Risk Factors and elsewhere in the documents we file from timeto-time with the SEC. We undertake no obligation to update these forward-looking statements, which speak only as of the date hereof. 2

3 Agenda Flash Dynamics Commoditization Demand Drivers IP Financials Outlook 3

4 Flash Dynamics Flash now fastest growing semiconductor market Disruptive, enabling power of Flash comes from dramatic cost reductions through technology scaling (Moores Law) and economies of scale In next 3-5 years Flash will transform handsets, consumer multimedia devices, computing In next ~5 years no competing technology is expected to materially displace NAND/MLC In 2008, significant 200mm NAND fab capacity must be retired, has to be replaced by new advanced 300mm fabs 4

5 Flash Dynamics: Competitors Challenges High technology complexity: lithography, physics, MLC, x3, x4 IP (patents and know-how): flash, controllers, formats Competitive only through new 300mm mega-fabs Increasing complexity of NAND components (e.g x3, x4) will accelerate move from component sales to integrated system level products Access to global retail channels In past 3 years, Renesas, STmicro, Taiwan Inc, Saifun/Qimonda/Spansion/SMIC, had little to show for their considerable investments 5

6 Commoditization: How We Deal With It Commoditization dynamics driven by demand-supply balance. Therefore we focus on: Creating Flash mega-markets (e.g. digital film, USB, Mobile, SSD) Driving industry standard formats for broad adoption (e.g. microsd) Rational pricing strategy to fuel elasticity, enable new markets Relentless drive to lowest cost through rapid technology transitions Economies of scale of advanced 300mm mega-fabs Economies of scale of >1 million cards per day Selling differentiated end-products, not raw NAND components IP licensing being extended beyond Flash to cards, storage systems Moving up the food chain with CE penetration strategy: product innovation, value, global retail channels, global brand 6

7 NAND Flash Demand Drivers Billions of MB Data Imaging Audio Video & Computing Lifestyle Storage 35,000 30, Trillion MB Media Player 25,000 20,000 15, , 5-Yr CAGR: 114% USB Mobile Phone 10,000 PC 5,000 3 Billion MB 1.9 Trillion MB Other Automotive PC Gaming Mobile Phone Camcorder USB Drive Media Player Digital Camera Source: Gartner Dataquest, May

8 SanDisk Demand Drivers Our primary growth markets: Mobile: just taking off Consumer/cards: growth in video, EMEA, APAC Audio/Video: growth through differentiation, innovation, value Computing- expect significant SSD penetration by 2010 Our emerging growth markets: GPS Gaming Consumable, content Auto/Home entertainment Enterprise/security/archival Flash vastly more pervasive than any storage technology, including DRAM, Hard Disk, Optical 8

9 Mobile Industry Trends Mobile phones storage opportunity will dwarf all other flash markets in the next 3-5 years New features becoming standard (music player + digital camera + video player/recorder + GPS + ) Apple, Nokia, SNE etc accelerating multimedia adoption Digital content migrating into people s pockets We invented microsd and are #1 market share leader msystems acquisition strengthens us in mobile embedded, MegaSim 9

10 Phones With Memory Cards Growing Fast In Q3 07 we sold 42M mobile units Units (M) Penetration of Card Slots in Phones 28% 44% 55% 63% 70% 71% CAGR 5% CAGR 23% Global Handset Shipments (MU) Shipments of Slotted Phones (MU) Source: Strategy Analytics, Dec 2006 & Aug

11 Industry s Broadest Offering of Cards and USB Drives High-capacity cards 4 GB Ultra II SDHC Plus 8 GB microsd 8 GB Memory Stick Micro (M2) 8 GB Ultra II Memory Stick PRO Duo Cruzer Fleur Cruzer Tag Cruzer Snap Choice Awards for our Extreme III Cards: High-performance branded cards SanDisk Extreme Ducati Edition CompactFlash SanDisk Extreme Ducati Edition SD Plus 11

12 Sansa: Broad Line-up of Media Players Sansa Clip -Tiny wearable player - big sound Sansa TakeTV -Seamless PC-to-TV solution -Entry to home entertainment -Works with Fanfare Sansa View -Our first video MP3 player -16GB for $199 Sansa Connect - Wi-Fi enabled Sansa Express - Cable-free, direct USB attach Sansa Shaker -For Tweens -Toy stores Digital Audio Player Family 12

13 Expanding Portfolio of Computing Solutions -SATA Upto 64 GB - Notebook PCs (Dell) and Blade Servers (IBM) -UATA Upto 64 GB in capacity - For Notebook PCs (Dell) ussd 5000 Solid State Drive for Low Cost PCs Embedded module substitute for HDD 2-8 GB Capacities using MLC NAND Used in Intel-powered classmate PC Vaulter: - Accelerator for desktop, notebook PCs - 8 to 16 GB capacities - OEM-only solution - Available in

14 30% 25% 20% 15% 10% 5% 0% Europe: Strong Market Share Gains Cards & UFDs (Retail Channel) All Formats per Brand - Revenue Source: GFK Europe SANDISK xother SONY KINGSTON TRADEBRAND PNY TECH UNBRANDED TRANSCEND INTEGRAL

15 IP We believe we have an exceptionally strong IP portfolio well beyond 2009 We believe it is in the best interest of the parties to renew major license agreement by August 2009 Initiated aggressive cards/ storage system licensing program to capture non component royalties 3 Actions Filed Against 25 Companies in Q407 Continued expansion of Second Gen Flash IP (x3, x4, 3D, etc.) Acquisitions of msystems patent portfolio Acquisition of Matrix fundamental 3D patent portfolio Solid-State Storage Solutions licensing entity formed: captures strong third party flash systems IP portfolio Internal inventions at 5 R&D centers Growing royalties from licensees of SD/microSD formats 15

16 Business Model From Feb 2007 Analyst Day Revenue 2004 $1,777M 2005 $2,306M Non-GAAP 2006 $3,258M Non-GAAP 9-Mo YTD Results 2007 $2,650M Feb 2007 Non-GAAP Forecast 2007 Non-GAAP Target Model Revenue Growth 65% 30% 41% 27% 0-25% 25-40% Product Gross Margin Total Gross Margin 31.9% 38.6% 35.5% 42.2% 31.8% 38.8% 21.8% 31.3% 15-25% 22-32% 24-32% 30-38% Oper Expenses 15.0% 17.2% 17.7% 20.6% 20-25% 15-18% Oper Income 23.6% 25.0% 21.0% 10.7% 0-10% 15-20% 9-Mo YTD Op Income exceeds February Forecast, Q3 07 Op Income 15.7% 16

17 Cost Reduction & Product Gross Margin From February 2007 Analyst Day Actual 2004 Actual 2005 Actual 2006 Forecast 2007 Target Model Overall Cost Reduction per Bit 36% 55% 56% 40-50% 40-50%/Yr ASP/MB Reduction 38% 52% 59% Low 60% 40-50%/Yr Product GM% Change -2.8 pts +3.6 pts -3.7 pts Product GM% 31.9% 35.5% 31.8% * 15-25%* 24-32%* [26%* in Q3 07] *Non-GAAP gross margin 17

18 Long History of Stable Margins Cumulative Pricing 2006/1H07 Broke Trend Market Self Correcting 50% Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 40% ASP/MB Decline Margins 30% 20% 10% 0% -10% -20% -30% -40% -24% -11% -3% -2% -4% -16% -22% -34% -10% -18% -5% -13% -24% -19% -25% -17% -23% -26% -16% * ASP/MB Decline (q/q) Operating margin Product GM% Total GM% * Q107 retail price decline was 36%; overall blended price decline of 23% distorted due to acquisition of msystems. 18

19 Outlook Despite tough 2007 (Q1 pricing, layoffs, paycuts), we have gained on competition through excellent execution and smooth integration with msystems, exiting Q4 07 much stronger than at Q4 06 Favorable supply/cost tail winds in 2008: Fab 4 ramp, transition to 43nm, first x3 products in Q2 08 Barring major global economic contraction, reasonably comfortable with 2008 operating margin target of 15-20% Managing our business for aggressive growth and thriving through down cycles 19

20 Thank You! 20